A PROBLEM OF RATING — the case of Durban

Abstract

Summary1. There is some doubt as to whether a local authority is empowered to discriminate against “productively used” property, since to do so may be construed as a tax on things other than immovable property.2. In the case of leasehold properties, an apportionment of the increased rate burden is likely to take place between the landlord and his tenant. To the extent that the landlord has to bear a share of the higher rate burden, there will be a decline in property values.3. The higher rates will tend to reduce building activity and reduce the intensity of site development. The fall in building activity will have downward “multiplier” effects which would affect the level of local employment.4. Subject to various qualifications there will be a tendency for the prices of properties with vacant possession to decline.5. The incidence of the higher rates will fall at least partly, and in many cases entirely, on local industrial, banking and insurance firms, and also building societies. Shops and hotels may have more scope for shifting the higher rates, on the whole, but here too some businesses will have to bear a substantial part of the burden.6. The dangers of higher rates (a) influencing industry to move out of Durban and (b) discouraging new industries from coming in, are real and should be given careful consideration by the authorities.7. The items of expenditure which the proposed higher rates for Durban will be used to finance will largely benefit owners of dwelling houses. Since the incidence of the higher rates will fall on businesses and their customers, owners of dwelling houses will receive a concealed form of subsidy.Some adjustment in the profitability of developing different classes of land, is also probable.8. There is a need for a revision of the relations between the Central and Provincial Governments, and local authorities, especially as regards the amounts paid by the former in lieu of rates.9. In view of the trend among individuals to live in one place and work in another, some grouping of local authorities into regional units might be considered.